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Dean Foods Company Message Board

deshrex 30 posts  |  Last Activity: Jul 22, 2014 2:56 PM Member since: Jun 16, 1998
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  • deshrex deshrex Jul 22, 2014 2:56 PM Flag

    Right, the unfortunate reality is that stores use milk as a loss leader. I actually support DF in walking away if some of these larger stores are trying to force DF to sell milk at a loss to get a contract. That $.55 estimate works out to a profit margin of just half of 1% so we know the business is not good.

    That new WSJ story - well worth reading and free - shows that the analysts and fund managers like WWAV a lot better. But WWAV's p/s ratio is 10 times higher than DF's - 1.89/.18 = 10. The loss leader dynamic inside stores that we see with milk does not seem to apply to soy milk and almond milk and so on, plus sales are increasing...

    If Chinese business men can come to the US and buy powdered milk and sell it for a profit in China, I don't understand why DF can't do the same thing, especially if the powdered business can improve on the very low margins of selling fresh milk here in the US.

    Sentiment: Hold

  • Reply to

    Serious Question:

    by fbi4hire Jul 15, 2014 10:08 AM
    deshrex deshrex Jul 15, 2014 11:38 PM Flag

    FBI, there's no law saying doctor's can't use an approved drug or treatment for an off label indication. Please see a good essay on this subject on Wikipedia. According to Wikipedia, the FDA does not have the authority to regulate the practice of medicine. If Provenge is most efficacious in early treatment, I am sure most doctors will use it that way. The whole idea is to keep the cancer confined to the prostate. Men with non-metastatic prostate cancer can live many years...

    Sentiment: Hold

  • Reply to

    Cancer therapy questioned

    by lenprov8 Jul 15, 2014 7:50 PM
    deshrex deshrex Jul 15, 2014 11:22 PM Flag

    Just to be clear, this NYT article is on the efficacy of androgen deprivation therapy for prostate cancer, not on DNDN's immuno-therapy.

    Sentiment: Hold

  • Reply to

    What the heck is wrong?

    by nquisiter Jul 14, 2014 1:12 PM
    deshrex deshrex Jul 14, 2014 4:20 PM Flag

    One possibility is the stock is being heavily shorted because the shorts see a vulnerable stock under the current ownership structure.

    WTW took on heavy debt to buy the stock back when it was very high. The stock was bought back carefully to maintain Artal's majority ownership. No debt has been retired since the buyback and the dividend was eliminated. The debt probably prevents any new buyback, but even if WTW could afford to do one, think of the ramifications with Artal: if WTW buys back here now that it is cheap, and Artal does not sell shares, then Artal's ownership will increase, which it may not want. Plus Artal probably does not want to sell at this low price, and so will not allow its holdings to be bought when they are cheap. In sum, and sorry to be clunky, but Artal probably does not want two things: to increase its ownership or to sell at a low price. Artal has been working this WTW holding for something like 13 or 14 years. Until the stock decline, Artal had been doing quite well.

    We are getting pretty low in terms of valuation. We are down to a PE of 12 and a P/S pretty far below 1 now. I am saving a little powder in case we get to a PE of 10 or lower.

    Finally, the market is still on a disruption kick, and WTW is one of the companies in the crosshairs. WU would be another. Harvard just put one of its apostles of disruption from HBS on the cover of its alumni magazine.

    Sentiment: Hold

  • Reply to

    Could bears argument be right?

    by jtl_bhc Jul 13, 2014 10:14 AM
    deshrex deshrex Jul 13, 2014 9:40 PM Flag

    In general, the bears are acting like rolling over debt is a strange and alien concept, when in fact companies do it every day. DNDN doesn't have to come up with the $600 million out of cash flow. DNDN only has to roll the debt over. The debt markets have been hospitable to junk level borrowers since the beginning of the recovery in '09. To be fair to the bears, the interest burden in the last 3 years has ranged between 14 and 20 percent of revenues, which is crazily high and won't go down until revenues increase and DNDN starts to pay down debt and not just roll it over....

    Sentiment: Hold

  • Reply to

    WU up

    by sdruff Jul 11, 2014 1:16 PM
    deshrex deshrex Jul 11, 2014 10:34 PM Flag

    Heavy volume, no news. I hope they are keeping the buyback going. Q1 buyback was a little strange - 10 million shares all at once at the end of the Q (Ycharts).

    Sentiment: Hold

  • Reply to

    Where's the Bottom???

    by freetzwilly Jul 11, 2014 12:35 PM
    deshrex deshrex Jul 11, 2014 10:00 PM Flag

    That 27% number sounds high for ESI. A lot of loans for ESI and other for profit schools are financed by Uncle Sam, which is why the industry gets heavy oversight, and of course the government itself is not going to charge 27%. I don't have time tonight to go back through the PEAKS and RSA 2009 documents, but I don't at all remember seeing a 27% number in any of those (PEAKS would be an example of private lending).

    ESI has a very modest amount of debt on its balance sheet - just $60 million, as of Sept. 30 '13, according to Yahoo. ( The OCA ruling recently is that the PEAKS debt should be put on the balance sheet, but Wall Street has already discounted that determination.) If ESI were lending heavily to its own students, it would need to borrow money to do so, and there's no evidence of such borrowings.

    Sentiment: Hold

  • Reply to

    Dark Pool Action

    by hansen1c Jul 4, 2014 9:45 AM
    deshrex deshrex Jul 11, 2014 4:56 PM Flag

    Well, dark pools are places where the 'usual suspects' go to trade. It's usually big traders trying to hide what they are doing from other big traders right? Or it could be the HFT players trying to get their half of a half of a cent per trade.

    But meanwhile today we did have a nice move up on heavy volume, though it was hardly a breakout move - it got us back to where we were on Monday. The stock has a heavy short position, so heavy volume on no news is just par for the course.

    In general, corn and wheat are pretty weak, which may lead to lower prices for cow feed (although I think there is a soy and hay component too), which could lead to dairy farmers keeping more dairy cows, and hence a lower price for raw milk at some point in the future. But that's kind of clunky logic and I doubt the market will discount lower raw milk prices unless they actually materialize. And the stock continues to discount hard times - very low margins and no revenue growth.

    Sentiment: Hold

  • deshrex deshrex Jul 5, 2014 7:45 PM Flag

    Well, as far as the accounting issues for ESI go, per the 8K of 6/24, the relevant determinations by the relevant authorities have been made, and the filing of back financial statement will proceed. So I think that issue is off the table.

    I'm not sure what the status is of the 'compliance audit' with the DOE. I think the issue here is that the DOE wants to see if actual job placement rates match up with the pitch that is made to prospective students...

    Freet, when u speak of sanctions, are u referring to the WSJ article behind the paywall? I don't find any Bloomberg article on their website that speaks of government sanctions against ESI...

    Sentiment: Hold

  • Reply to

    New 8-K

    by deshrex Jun 24, 2014 10:31 PM
    deshrex deshrex Jul 2, 2014 8:26 PM Flag

    I think today's (July 2) 8-K indicates ESI has gotten the waivers it needs from creditors to fund the trust.

    Sentiment: Hold

  • deshrex by deshrex Jun 24, 2014 10:31 PM Flag

    The OCA of the SEC has provided ESI with guidance so that ESI can issue all the missed 10 Qs from '13 and the 10 K for '13 as well. I don't see any new numbers regarding the funding of PEAKS and RSA 2009 that weren't covered in the Schedule A of the previous 8-K. We know that 2014 will be a year of heavy funding by ESI to PEAKS ($115 million more from ESI to the trust this year).

    In general, the question here is the balance of assets versus debt in the trust. The rules of the trust call for one dollar of solid assets for every dollar of trust debt (the number is actually 1.05). If debt quality deteriorates (i.e. students don't stay current on their loans), then ESI is required to put money into the trust to retire debt and get the ratio back up to 1.4 (by shrinking the denominator). The debt stands at $214 million (as of March '14, I guess), down from $300 million originally. As ESI puts money into the trust and the debt holders are paid off, ESI is in effect making itself the ultimate creditor to the students who got the PEAKS loans.

    If ESI puts $115 million more into the trust this year, the trust debt should stand at about $100 million at the end of the year (214 minus 115), and if the trust meets the tough 1.4 ratio, assets should be $140 million. As per Schedule A of the previous 8-K, at that point the trust should be able to wind down without a lot more monetary input from ESI, unless the loans to the students prove to be just catastrophically bad, which would kind of raise the existential question of what is ESI teaching these people and does it have any market value?

    Sentiment: Hold

  • Reply to

    The Brand

    by illinigraduate4677 Jun 7, 2014 11:49 AM
    deshrex deshrex Jun 9, 2014 10:54 AM Flag

    The question is how much ice does the training cut with employers. If ITT grads can find jobs, show up and do the jobs they were trained for, then I think the ITT brand will be in good shape. A lot of this Wall Street stuff just doesn't make its way to the general public...

    Sentiment: Hold

  • deshrex deshrex Jun 2, 2014 11:27 PM Flag

    OK well I went back and reread the Seeking Alpha May 22 transcript and the recent 8-ks from ESI. I couldn't find that number you mention. You may be referring to the nominal amount of debt issued by RSA 2009 and PEAKS. But keeping in mind that ESI added $40 million to the PEAKS trust in Q1 2014, I do think ESI is making an estimate with its latest 8-K that its obligations to RSA 2009 and PEAKS can be met with a sum of something in the neighborhood of $230 million, through a period of time extending to late in this decade.

    Sentiment: Hold

  • deshrex deshrex Jun 2, 2014 11:56 AM Flag

    Do you have a citation for that $375 million number? ESI posted a Schedule A in the latest 8k with collateral obligations and a schedule for meeting them for a sum much less than $375 million. And ESI's own number for its Dec. 31, '13 long term debt is zero (this number is on the website but it's unaudited).

    Sentiment: Hold

  • deshrex deshrex May 30, 2014 11:08 AM Flag

    Well, we are down to a .4 price to sales ratio, much lower than STRA or DV or APOL. And much, much lower than out of favor momentum names like BLOX and SPLK. We have the example of COCO, with a price to sales ratio of less than .1. So Wall Street seems to be saying that ESI is more in the COCO camp than the STRA-DV-APOL camp.

    Unfortunately, according to the Schedule A in the latest 8-K, ESI will be in the position of having to post cash as collateral for RSA and PEAKs for something like the next two years. This cash is not by any means a loss. But it's cash that has to be set aside, and the whole question gives tremendous ammunition to the shorts.

    I heard the other day someone refer to the students who use these schools as the 'ambitious poor.' What kind of socio-economic formulation is that? Is there something wrong with wanting to get out of poverty? Poor kids can work many a crummy job in this country without getting anything in the way of a marketable skill. I also think we have a socio-economic disconnect in the sense that the hedge funds and business press are full of Ivy League kids who enter the economy at much more privileged levels and who think these kinds of schools are a scam.

    Sentiment: Hold

  • Bloomberg is reporting today that the English journal The Lancet has estimated that 2.1 billion people around the world are either overweight or obese. Obesity increases risks for heart disease, cancer and diabetes...

    Sentiment: Hold

  • deshrex deshrex May 23, 2014 5:25 PM Flag

    Well COCO is interesting. COCO does more business than ESI. Yahoo data shows that COCO has impressively cleaned up its balance sheet, from over $300 million in long term debt as of June '11, to just $12million as of the end of March. In that latest March qtr, COCO spent well less than 1% of revenues on interest. But COCO is being dogged by financial concerns. It needs access to credit to conduct its business, and yet certain business developments have put it in breach of covenants with its bank syndicate, apparently. (COCO got some waivers recently.) It sounds like the COCO CEO would like to sell the business, but if he can't or won't, COCO may very well be able to persist and survive and build up a cash cushion. Wall Street has already discounted failure, so it's hard for Wall Street to too much more damage to COCO.

    Sentiment: Hold

  • deshrex deshrex May 23, 2014 2:23 PM Flag

    If I can chime in on my original post, this money (or part of it) that ESI puts into the trust may well be recovered depending on loan performance, it's not at all a certain loss. Meanwhile the ESI price to sales ratio is now below .5...

  • I guess enrollment questions are open ended and won't be resolved soon.

    But ESI does seem to be putting a size and dimension on the PEAKS and RSA 2009 obligations going forward. According to the 8K Schedule A, these obligations through 2020 may total $227 million, with most payments (about $196 million) due the next 2 years.

    According to today's call, ESI can meet these obligations without borrowing any money or needing to close any sale - lease back transactions. Also according to the call, private loans and RSAs (risk sharing agreements) are no longer part of the business model...

    Sentiment: Hold

  • Reply to

    Questions from Q1 call

    by davionprince May 11, 2014 11:47 PM
    deshrex deshrex May 16, 2014 1:15 PM Flag

    DF is between the devil and the deep blue sea. DF has to eat much higher raw milk prices while stores resist raising prices for processed milk. A recent Reuters piece on frugal shoppers mentioned that raw milk prices have risen on the order of 30% in recent months while stores have only allowed retail price increases of about 6%. The new Yahoo earnings estimate works out to a profit margin of less than 1%. DF has shown some willingness to forgo contracts and business if it's done at break even or a loss, so maybe the future holds revenue shrinkage until DF arrives at a more profitable core business...

    Sentiment: Hold

DF
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